Investing 101 tells us that rising interest rates are bad for a bond portfolio. But if you’ve got a long investment horizon, that isn’t necessarily so. We think investors should be more concerned about the end of the credit cycle than rising rates.
Should municipal bond investors be thinking about inflation protection? Without a doubt. But some inflation strategies are better than others. Choosing the right one could make all the difference.
Global equities posted their first quarterly decline in two years during a volatile first quarter. Growing concerns about rising rates, trade wars and regulation in the technology sector will require a new mindset for investors.
The active/passive debate has been raging for years, and both approaches have merit. But there’s more to the story than meets the eye. Investors who commit too much to passive—and not enough to active—could face mounting risks.
Worried about rising rates? Don’t take your money out of the municipal market and put it in cash. That could cost you.
Economic trends clearly point toward higher inflation and interest rates ahead, which will likely make capital markets more volatile. Based on recent headlines, politics seems likely to add fuel to this fire.
President Trump’s plans for tariffs on about $60 billion of Chinese imports have rattled equity markets. Investors should begin to study which types of industries, countries and companies could win or lose if an all-out trade war erupts.
Rising US interest rates could pose a challenge for target-date funds (TDFs) that concentrate on “core” US fixed-income exposure. Diversifying across a broad range of bond markets and strategies can create a cushion in a rising-rate environment.
There’s not much suspense around this week’s Fed meeting: the fed funds target rate is almost certain to rise by 25 basis points. We think it’s more important not to overlook this cycle’s endgame.
What should bond investors do when rates are rising and the credit cycle is ending? Perhaps not what you would expect. But getting this right can be critical for the health of your fixed-income allocation.
China is rapidly becoming a trendsetter in many digitally driven industries. This is turning conventional research methodology on its head. Investors should look to China to discover where technology and retail markets around the world are headed.
Passive equity strategies have seen massive inflows over the last decade, in part owing to active management’s struggles. But a closer look at the story within the story suggests that leaving active out of the equation could be leaving money on the table.
It’s human nature to want to protect your portfolio when the market takes a sharp turn. But too often, bond investors make the wrong choices when interest rates rise and credit cycles end. This can have disastrous consequences for returns.
The US corporate credit cycle is nearing its end, and the cycle in parts of Europe isn’t far behind. This can create treacherous conditions for unprepared investors. The first line of defense, in our view, is knowing what to expect.
There’s a curious anomaly in the US stock market. Shares of highly profitable companies have risen more slowly than their earnings growth has in recent years. This is an important signpost for investors in today’s complex market conditions.
Target-date funds played a big part in helping defined contribution (DC) plan participants stay invested through February’s market turmoil. And history does repeat: in the severe 2008–09 financial crisis, these funds kept many participants positioned to take part in a lengthy bull market.
Following a strong 2017, emerging-market debt (EMD) held its own in January despite a sharp rise in US interest rates. That’s no accident. Economic fundamentals have improved dramatically, leaving EMD well positioned to withstand future turbulence.
Worried about rising defaults? There are good reasons not to be. Not only do high defaults not translate into poor high-yield returns, but we don’t expect a slew of defaults in 2018.
US inflationary pressures are developing that could be destructive. Investors need to seek protection quickly. But how? For municipal investors, some inflation strategies fall short, leaving portfolios at risk.
Bond investors get anxious when rates rise suddenly, as Treasury yields have recently. But if your investment horizon is longer than a few months, rising rates are nothing to be afraid of.
Finding high-quality companies is an essential component of many equity strategies. But with revolutionary forces sweeping through key industries, what really defines quality stocks? Investors must think proactively about how to identify quality in a changing world.
Think emerging-market debt might as well be managed passively? Think again.
Market volatility has spiked recently, driven largely by growing concerns about rising inflation and interest rates. We think the volatility is exaggerated, but we’re not surprised inflation is rising—and rates along with it.
Congress may finally be inching toward an overhaul of the US housing finance system. That’s good. But getting reform right is more important than getting it done. To us, that means ensuring the government retains a clearly defined role in the mortgage market.
Global equity markets are still hurting from last week’s sell-off. Yet the renewed volatility could mark a return to reality after an unusually long period of steady gains and may even foster a healthier investing environment over time.
Should investors worry about the recent rise in US Treasury yields? If they’re high-frequency bond traders—maybe. But for income-oriented investors with a longer investment horizon, our advice is simple: relax.
The tremors that have battered financial markets recently have been nerve-wracking. But remember, the market is not the economy. Economic growth can persist even when markets decline, and that growth can eventually help to stop the slide.
Some investors aren’t very concerned about Fed policy and rising US interest rates. That’s because history has shown that emerging-market debt frequently posts positive returns even when US bond yields rise.
As the Chinese New Year approaches, investors will welcome the year of China A-shares, soon to be included in the MSCI emerging-market (EM) benchmarks. But put careful consideration into determining which funds are actually ready to join the festivities.
Investors worried about an equity correction might see low volatility as a sign that buying options is a cheap way to protect a multi-asset portfolio. But the cost today is higher than it seems.
After a fantastic year, concerns are growing about a potential downturn in the stock markets. At times like these, it’s especially important to focus on investing strategies that can deliver a smoother pattern of long-term returns.
Market conditions may change in 2018, and that’s good for income-oriented investors. Yes, interest rates are rising and some assets look expensive. But there are still plenty of horses to ride in this race.
Fake news. It’s pervasive these days. And it’s no longer exclusively a problem for politicians, journalists and Facebook. It’s made its way into the capital markets too, particularly in areas of major global economic and financial impact.
As 2018 gets rolling, markets don’t have great expectations for Fed interest-rate hikes. Based on futures pricing, roughly two small increases are anticipated this year. We think there will be more.
After a record 2017, private equity funds have $1 trillion to deploy. The Financial Times reported this week that the buyout industry is raising more money than it can spend. As new risks surface, we think public equity portfolios with the right strategic mindset can deliver similar benefits to investors.
Is the end of quantitative easing (QE) a big deal? Might tax reform provide an added boost to the US economy? Should investors brace for more volatility in 2018? Yes, yes and yes.
Products and companies with sustainable competitive advantages and low capital requirements often make for attractive investments, provided they’re acquired at the right price. So where does this leave blockchain?
Investors seeking floating interest-rate exposure and high yields are increasingly turning to credit risk–transfer securities (CRTs), a fairly new type of mortgage-backed bond. But could US tax-code changes hurt the housing market and, by extension, CRTs? We don’t think so.
They are the primary objectives of municipal bond investing: Safety. Income. After-tax return. But the market doesn’t always provide the ideal environment, and the coming year looks to be no exception. How can muni investors avoid getting knocked off course in 2018? They can adhere to these five strategies.
Changing market conditions over the last five years have taught us a few things about managing risk. The most important lesson? Delivering downside protection constantly requires refining and adjustment.
As the new year begins to unfold, the environment for risk assets is still benign: the global economy is strong, monetary policy is accommodative, and volatility is low and steady. At this point, we don’t see excesses developing that could change that.
The Wall Street Journal published an article on January 7 challenging the safety of municipal bonds as “not [being] the reliable bet they once were.” While its headline may startle some investors, we’ve been endorsing this view for years. Municipal bonds simply aren’t a set-it-and-forget-it choice.
Equity markets are widely expected to do well this year after a stellar 2017. We share the optimism, but are monitoring multiple risks—from style patterns to inflationary pressures—that could deliver surprises as the year unfolds.
2017 was supposed to be the year that would put an end to modest growth, lukewarm inflation and anemic bond yields. It didn’t live up to the hype. But pressures are building, and that means volatility ahead—as well as opportunity.
Emerging-market (EM) equities posted a strong recovery in 2017 after several tough years. But it’s not too late to invest. We think there are still good reasons to add or increase EM exposure in 2018.
Emerging-market bonds delivered strong returns last year, and we think the sector has more potential. In 2018, though, investors will have to exercise caution.
By going on the ground in emerging markets and talking to people in their homes, equity investors can develop research insights about long-term, powerful trends driven by environmental and social sustainability.
As 2018 approaches, investors may want to take some time to reexamine their high-income strategies. We’ve got some advice: Be selective. Be diversified. And, perhaps most importantly, be patient.
At 10 years and counting, the US credit cycle appears to be nearing an end. Could a sweeping rewrite of the tax code keep it alive a little longer? Maybe.
Equity investors appear to have voted in favor of US tax reform. But the optimism may need to be tempered. We believe that the impact of the tax overhaul on individual stocks will be mixed and will depend on several factors.
